Gauging Big Pharma’s Performance and Outlook
Earnings season has begun with many of the pharmaceutical majors reporting 2014 results. So how did companies fare and what is their outlook for 2015? DCAT Value Chain Insights (VCI) examines 2014 performance and what lies ahead.
Many of the pharmaceutical majors released their earnings last week, offering not only highlights of their financial performance but also insight into the strategies that will shape their near-term focus. So what were the highlights for top-selling drugs, pipeline candidates, and other initiatives? DCAT Value Chain Insights (VCI) takes an inside look.
A roundup of activity
Pfizer. In 2014, Pfizer reported a 9% decline in revenues year over year to $49.6 billion. At the beginning of fiscal year 2014, the company began managing its commercial operations through a new global commercial structure consisting of two distinct businesses: an Innovative Products business and an Established Products business. The Innovative Products business is composed of two operating segments: the Global Innovative Pharmaceutical segment (GIP) and the Global Vaccines, Oncology and Consumer Healthcare segment (VOC). The Established Products business consists of the Global Established Pharmaceutical segment (GEP). The company’s GEP segment reported 2014 revenues of $25.149 billion, down 9% year over year, and a 3% decline in GIP revenues to $13.861 billion. Revenues in its Global Vaccines business were up 13% to $4.480 billion. Revenues in its Consumer Healthcare business was were up 3% to$3.466 billion, and revenues in its Global Oncology business were up 12% to $2.218 billion.
In commenting on the results, Ian Read, chairman and chief executive officer (CEO) of Pfizer said: “During 2014, despite significant continued revenue headwinds from product losses of exclusivity and co-promote expiries, we were able to deliver modest adjusted diluted EPS [earnings per share] growth.This was achieved through a combination of incremental revenue generation from key inline products and recent product launches, responsible expense management as well as supportive capital allocation.”
Going forward in 2015, a key development for Pfizer is the recent approval by the US Food and Drug Administration (FDA) for the company’s new molecular entity, Ibrance (palbociclib), a small molecule to treat advanced (metastatic) breast cancer. In addition to this development, Read said the company expects strong growth in emerging markets (revenues in emerging markets increased 7% operationally in 2014) and from recent product launches in developed markets, including: Eliquis (apixaban), an anticoagulant; Xeljanz (tofacitinib), a drug to treat rheumatoid arthritis; the vaccine, Prevnar 13, in adults; and Nexium 24HR, an over-the-counter version of the gastrointestinal drug, esomeprazole. Pfizer announced in January 2015 that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending that the indication for Prevenar 13 be expanded to include the prevention of pneumonia caused by the 13 pneumococcal serotypes in the vaccine in adults 18 years and older. Prevenar 13 is currently approved in Europe for the prevention of invasive pneumococcal disease in the same population.
Pfizer plans to begin 20 registrational studies during the coming four years with candidates with target indications that have significant unmet need. One key area is in immunotherapies. In November 2014, Pfizer entered into an agreement with Merck KGaA to jointly develop and commercialize MSB0010718C (proposed international non-proprietary name is avelumab), an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. Pfizer and Merck KGaA will explore the therapeutic potential of this anti-PD-L1 antibody as a single agent as well as in various combinations with Pfizer’s and Merck KGaA’s portfolio of approved and investigational oncology therapies. Both companies will collaborate on up to 20 high priority immuno-oncology clinical development programs expected to commence in 2015.These clinical development programs include up to six trials (Phase II or III) that In addition, separate from the PD-L1 programs, Pfizer and Merck KGaA will also combine resources and expertise to advance Pfizer’s anti-PD-1 antibody into Phase I trials. The parties have also agreed to co-promote Pfizer’s Xalkori (crizotinib), a drug to treat non-small-cell lung cancer, in the US and several other key markets. Under the agreement, Merck KGaA received an upfront payment of $850 million and is eligible to receive regulatory and commercial milestone payments of up to approximately $2 billion. Both companies will jointly fund all development and commercialization costs, and split equally any profits generated from selling any anti- PD-L1 or anti-PD-1 products from this collaboration.
Novartis. In 2014, Novartis’ overall net sales increased 1% (+3% constant currency (cc)) to $58.0 billion. Growth products contributed $18.6 billion or 32% of the company’s net sales, up 18% (in US dollars) over 2013. Loss of exclusivity, including for its hypertensive drug, Diovan (valsartan), impacted sales by approximately $2.4 billion. The company’s pharmaceuticals division delivered net sales of $31.8 billion (-1%, +1% cc) for the full year 2014, driven by volume growth (+7 percentage points) and pricing (+1 percentage points), offset by the impact of generic competition (-7 percentage points). Growth products continued to drive performance and generate $13.7 billion of division net sales, up 17% (cc) over the previous year. From a divisional perspective, the company expects net sales performance (cc) in 2015 to be in the mid-single digit growth for its pharmaceutical division, mid- to high-single digit growth for Alcon, its eye division, and mid-single digit growth for Sandoz, its generics business.
Novartis is also proceeding with two important deals announced in 2014. On January 1, 2015, Novartis announced that it completed the divestment of its Animal Health Division to Eli Lilly for approximately $5.4 billion. This divestment is part of a set of transactions announced in April 2014 to focus Novartis on three leading businesses: innovative pharmaceuticals, eye care, and generics. That deal was concurrent to a three-part transaction with GlaxoSmithKline (GSK), which is expected to be completed in the first half of 2015. Under the deal, Novartis is divesting its vaccines business (excluding influenza vaccines) to GSK, creating a consumer healthcare joint venture with GSK, and acquiring GSK’s marketed oncology portfolio, related R&D activities and rights to two pipeline AKT inhibitors.
Novartis also is proceeding with ongoing productivity initiatives related to procurement and resource allocation across the portfolio as well as in R&D, manufacturing, and supporting infrastructure. Novartis Business Services (NBS) was launched in July 2014, and at the end of fourth quarter of 2014, it had over 7,500 associates. The organizational structure was established and the financial systems were in place as of January 2015, making NBS fully operational as a shared services organization. NBS is designed to enhance profitability by harmonizing services at better price across the group and divisions.
In terms of key recent drug approvals and pipeline developments, in January 2015, the company’s Cosentyx (secukinumab) received regulatory approval in the US and European Union (EU) for psoriasis, following the December 2014 approval in Japan in psoriasis vulgaris and psoriatic arthritis. In January 2015, the FDA Oncologic Drugs Advisory Committee recommended approval of Sandoz’s investigational biosimilar filgrastim in the US for use in all indications included in the reference product’s (Neupogen) label. Some key regulatory filings include are US and EU filings for LCZ696 as a treatment for patients with heart failure with reduced ejection fraction, and a submission to the FDA for QVA149 and NVA237 for the long-term maintenance treatment of chronic obstructive pulmonary disease.
Roche. Roche reported group sales of CHF 47.5 billion ($41. 4 billion) in 2014. Growth in pharmaceuticals was driven by medicines for HER2-positive breast cancer (+ 20%), as well as the cancer drug Avastin (bevacizumab) (+ 6%). New products, Perjeta (pertuzumab) and the antibody drug conjugate, Kadcyla (trastuzumab emtansine), both for treating HER2-positive breast cancer, made a contribution to growth, which offset declining sales of the cancer drug, Xeloda (capecitabine), which now faces generic competition. The company reported strong demand for immunology medicines, notably Actemra/RoActemra (tocilizumab) (+ 23%) for rheumatoid arthritis and Xolair (omalizuma) (+2 5%) for treating chronic hives and allergic asthma. Sales of the antiviral medicine, Tamiflu (oseltamivir) (+ 54%), increased considerably late in 2014 as a result of the US flu epidemic. In 2015, Roche expects overall sales to grow in the low- to mid-single digits at constant exchange rate.
In terms of key products’ progress, in 2014, two new indications were approved for the cancer medicine, Avastin: platinum-resistant ovarian cancer and cervical cancer. Gazyvaro (obinutuzumab), a glycoengineered anti-CD20 monoclonal antibody, was approved for the treatment of chronic lymphocytic leukemia in Europe. Esbriet, a recently acquired idiopathic pulmonary fibrosis (IPF) medicine, was granted FDA Breakthrough Therapy Designation in July 2014 and subsequently launched in October 2014 in the US following regulatoryapproval. Esbriet was granted marketing authorization in the European Union (EU) in 2011 for the treatment of adults with mild to moderate IPF in all 28 EU member countries and has since been approved in Norway, Iceland, Canada. Also in 2014, the FDA granted Breakthrough Therapy Designation for Lucentis (ranibizumab) in diabetic retinopathy and for a new cancer immunotherapy compound, an anti-PDL1, in bladder cancer. Also, over the last ten months, Roche has made 10 targeted acquisitions to complement its current product portfolio overall, including InterMune, the developer of Esbriet (pirfenidone), and Seragon Pharmaceuticals, which is researching treatments for hormone receptor-positive breast cancer.
Johnson & Johnson. Johnson & Johnson reported worldwide sales for the full-year 2014 of $74.3 billion, an increase of 4.2% versus 2013. Operational results increased 6.1%, and the negative impact of currency was 1.9%. Domestic sales increased 9.0%. International sales increased 0.4%, reflecting operational growth of 3.7% and a negative currency impact of 3.3%. Worldwide pharmaceutical sales were $32.3 billion for the full-year 2014, an increase of 14.9% versus the prior year with operational growth of 16.5% and a negative impact from currency of 1.6%. Domestic sales increased 25.0%; international sales increased 5.0%, which reflected an operational increase of 8.3% and a negative currency impact of 3.3%.
The strong sales results were driven by new products and the strength of core products. New products included Olysio/Sovriad (simeprevir) for combination treatment of chronic hepatitis C in adult patients; Xarelto (rivaroxaban), an oral anticoagulant; Zytiga (abiraterone acetate), an oral, once-daily medication for use in combination with prednisone for the treatment of metastatic, castration-resistant prostate cancer; Invokana (canagliflozin), for the treatment of adults with Type 2 diabetes; and Imbruvica (ibrutinib), an oral, once-daily therapy approved for use in treating certain B-cell malignancies, or blood cancers. Additional contributors to operational sales growth were Stelara (ustekinumab), a biologic approved for the treatment of moderate to severe plaque psoriasis and psoriatic arthritis; Invega/Sustenna/Xeplion(paliperidone palmitate), a once-monthly, long-acting, injectable atypical antipsychotic for the treatment of schizophrenia in adults; Simponi/Simponi Aria (golimumab) and Remicade (infliximab), biologics approved for the treatment of a number of immune-mediated inflammatory diseases.
In the fourth quarter of 2014, the company submitted two new drug applications (NDAs) to the FDA for regulatory approval. These included an NDA for three-month atypical antipsychotic paliperidone palmitate as a treatment for schizophrenia in adults as well as an NDA for Yondelis (trabectedin) for the treatment of patients with advanced soft tissue sarcoma, including liposarcoma and leiomyosarcoma subtypes, who have received prior chemotherapy including an anthracycline. Also, a supplemental NDA was submitted to the FDA and a Type II variation application was submitted to the EMA for an additional indication of Imbruvica (ibrutinib) for the treatment of patients with Waldenström’s macroglobulinemia, a rare type of B-cell lymphoma. In 2014, the company acquired Alios BioPharma, Inc., a privately held clinical-stage biopharmaceutical company focused on developing therapies for viral diseases.
Bristol-Myers Squibb. Bristol-Myers Squibb reported 2014 revenues of $16. 385 billion, down 3% year over year. The company expects worldwide revenues between $14.4 billion and $15.0 billion in 2015.
On a product basis, a key development for 2014 was the US approval of Opdivo (nivolumab), the company’s PD-1 immune checkpoint for treating advanced melanoma. Opdivo is indicated for the treatment of patients with unresectable or metastatic melanoma and disease progression following Yervoy and, if BRAF V600 mutation positive, a BRAF inhibitor. Opdivo is also being developed for other cancer indications. Bristol-Myers Squibb has a broad, global development program to study Opdivo in multiple tumor types, which consists of more than 35 trials, as monotherapy or in combination with other therapies, in which more than 7,000 patients have been enrolled worldwide. Among these are several potentially registrational trials for non-small-cell lung cancer, melanoma, renal cell carcinoma, head and neck cancer, glioblastoma, and non-Hodgkin lymphoma.
Going ahead in 2015, key issues for the company will be changes in executive leadership. Bristol-Myers Squibb announced several leadership changes approved by its board of directors and effective at the close of its annual shareholders’ meeting on May 5, 2015. Chief among them is that Giovanni Caforio, MD, now chief operating officer, will become CEO of the company, and Lamberto Andreotti, now CEO, will become executive chairman of the board of directors on May 5 and will continue to serve as chairman after his retirement on August 3, 2015.
On the manufacturing front, in November 2014, Bristol-Myers Squibb announced plans to construct a large-scale biologics manufacturing facility in Cruiserath, County Dublin, Ireland. The facility will produce multiple therapies for the company’s biologics portfolio and will increase Bristol-Myers Squibb’s biologics manufacturing capacity. The 30,000-square meter project will house six 15,000-liter bioreactors and a purification area as well as office and laboratory space. The plant will be built on the grounds of the company’s existing bulk pharmaceutical manufacturing plant. Bristol-Myers Squibb’s board of directors has approved initial funding that will support the first phase of the project. The full cost of the facility, expected to be finalized in the second half of 2015, is anticipated to be comparable to the approximately $900-million investment to construct and operationalize the company’s biologics manufacturing facility in Devens, Massachusetts.
AbbVie. In 2014, AbbVie reported net sales of $19.960 billion, up from $18.790 billion in 2013. On a product basis, sales increased 7.1% on an operational basis (excludes the impact of exchange-rate fluctuations) and 5.8% on a reported basis to $19.879 billion. Sales of its key product, Humira (adalimumab), which accounted for 63% of 2014 product sales, increased 18.9% on an operational basis and 17.7% on a reported basis to $12.543 billion. Humira is indicated for treating rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis, and plaque psoriasis. A key issue for AbbVie in the near-term is the patent expiry for Humira. The United States composition of matter (i.e., the compound) patent covering adalimumab is expected to expire in December 2016, and the equivalent European Union patent is expected to expire in the majority of European Union countries in April 2018.
As a means to diversify its product portfolio and pipeline, in 2014, AbbVie made a $54.7-billion bid to acquire the specialty pharmaceutical company, Shire, a proposed bid that was later terminated. AbbVie’s proposed acquisition of Shire involved a tax inversion structure by which the New AbbVie was to become a holding company for the combined AbbVie and Shire and which was to be incorporated in Jersey, the UK, Shire’s current place of incorporation. Through its incorporation in the UK, the AbbVie board expected the transaction to reduce New AbbVie’s effective tax rate to approximately 13% by 2016. A subsequent notice by the US Department of Treasury, however, which signaled a limiting of corporate tax inversions, cast uncertainty as to this practice, so AbbVie decided to terminate the proposed acquisition.
Looking ahead, hepatitis C is a key product focus for AbbVie. In January 2015, the European Commission granted marketing authorizations for AbbVie’s all-oral, short-course, interferon-free treatment of Viekirax (ombitasvir/paritaprevir/ritonavir tablets) + Exviera (dasabuvir tablets). The treatment was approved with or without ribavirin (RBV) for patients with genotype 1 (GT1) chronic hepatitis C virus (HCV) infection, including those with compensated liver cirrhosis, HIV-1 co-infection, patients on opioid substitution therapy and liver transplant recipients. Additionally, Viekirax was approved for use with RBV in genotype 4 (GT4) chronic hepatitis C patients.
Viekirax consists of the fixed-dose combination of paritaprevir 15 0mg (NS3/4A protease inhibitor) and ritonavir 100 mg with ombitasvir 25mg (NS5A inhibitor), dosed once daily, and Exviera consists of dasabuvir 250 mg (non-nucleoside NS5B polymerase inhibitor) dosed twice daily taken with or without ribavirin, dosed twice daily. With this approval, AbbVie’s treatment is now licensed for use in all 28 member countries of the European Union(EU) and was previously approved in the US, Canada, Switzerland, Iceland, Liechtenstein, and Norway. Paritaprevir, one of the active ingredients in Vierkirax, was discovered during the ongoing collaboration between AbbVie and Enanta Pharmaceuticals for hepatitis C protease inhibitors and regimens that include protease inhibitors. Paritaprevir was developed by AbbVie for use in combination with AbbVie’s other investigational medicines for the treatment of chronic hepatitis.
In 2014, AbbVie expanded its manufacturing facility in Sligo, Ireland. The expansion provides increased manufacturing capacity for the company’s existing product portfolio as well as new therapies within the company’s pipeline. AbbVie’s presence in Ireland also includes locations in Dublin and Cork, as well as a second plant in Sligo at Ballytivnan. Also in 2014, AbbVie announced it will invest $320 million to establish operations in Singapore for small-molecule and biologics active drug substance manufacturing. The completed facility will provide manufacturing capacity for emerging compounds within AbbVie’s oncology and immunology pipeline to serve markets globally. The investment will establish the first manufacturing presence in Asia by AbbVie. AbbVie anticipates the new facility will be fully operational by 2019.
Eli Lilly. For the full-year 2014, Eli Lilly and Company reported a 15% decline in revenue to $19.6 billion. In commenting on the results, John C. Lechleiter, Lilly’s chairman, president and CEO said: “Despite the loss of significant revenue for Cymbalta and Evista following the expiration of our US patents, we saw strong performance from many other products. At the same time, we made excellent progress with our innovation-based strategy, and we continue to advance our pipeline. Throughout the balance of this decade, we aim to drive revenue growth and expand margins as we offer new medicines to the people who need them.”
In 2014, Eli Lilly received approval for Trulicity (dulaglutide), a drug to treat Type 2 diabetes, and Cyramza (ramucirumab), a drug to treat patients with advanced stomach cancer or gastroesophageal junction adenocarcinoma and which was later approved for treating, in combination with docetaxel, metastatic non-small cell lung cancer with disease progression on or after platinum-based chemotherapy. In addition, Eli Lilly is partnered with Boehringer Ingelheim for Jardiance (empagliflozin), a drug for treating Type 2 diabetes, which also was approved in 2014 and which is part of the companies’ diabetes alliance. In January 2015, Lilly also completed its $5.4 billion acquisition of Novartis’ Animal Health Division.
As of press time, Merck & Co., AstraZeneca, Sanofi, and GlaxoSmithKline had not reported their results but were scheduled to do so in early February 2015.